Boeing Proposes Venture to Control Embraer

The Boeing Co. reportedly has proposed establishing a joint-venture with Embraer to operate that company’s commercial aircraft business. According to published reports, the venture has been proposed to Brazilian government officials, whose endorsement would be necessary for Boeing to make the Embraer acquisition.

One Brazilian report indicated that Embraer’s stakeholders already have accepted the Boeing proposal, which would leave the Embraer military aircraft business as a separate entity.

However, a spokeswoman for Boeing in Brazil indicated the proposal remains under discussion.

No schedule or valuation has been announced for the proposed combination.

In December, Boeing and Embraer jointly confirmed that they are “engaged in discussions regarding a potential combination, the basis of which remains under discussion … There is no guarantee a transaction will result from these discussions.”

Embraer is the third-largest commercial-aircraft business in the world, after Boeing and Airbus. The group is privately owned but the government retains “golden shares” – a nominal stake that retains veto power over significant, strategic issues, such as ownership.

Both Boeing and Embraer have separate commercial aircraft and defense programs. According to some reports, Boeing’s interest in Embraer is rooted in its efforts to develop a new, “middle market” aircraft series, larger than its narrow-body 737 platform but smaller than its 777 and 787 long-distance jets.

The joint-venture Boeing is reportedly considering would provide it with an 80%-90% ownership stake. It would pay an undisclosed amount of cash, the proceeds of which would be distributed to Embraer’s current shareholders.

The government’s golden shares would be preserved in the joint-venture ownership.